Estimated reading time: 2 minutes and 17 seconds

The most successful businesses cover all their bases. Owners Strategies for the best outcome, but they also plan for worst-case scenarios. And while no one likes to think about the truly unexpected situations such as the death of a key person in the business, it’s important to be prepared. This one of the main reasons why owners consider business life insurance.

Should an unexpected death occur, business life insurance can help you protect your family, partners and company. Not only can you use life insurance funds to pay debts, cover expenses or hire replacements, you can also assure creditors and customers that your business is still going strong. However, did you know that you can use your business life insurance to increase tax efficiency and facilitate business growth plans as well? Below are a few other reasons why business life insurance could be a wise investment for you.

1. It’s a tax-sheltered investment

The growth of many other corporate investments is subject to high taxes. When you invest in business life insurance, it’s not. The growth on whole life insurance policies are tax free for the entire life of the policy. If a death occurs, the proceeds to shareholders or partners are also not taxable once the payout is treated as a dividend.

2. You’ll have greater cash liquidity

If you want to grow your business or need access to cash, your business life insurance policy might be the lifeline you need. In some cases, you can borrow up to 90% of the cash value of the policy. There is more stable liquidity in this type of investment as compared to other fixed asset investments which are often subject to market fluctuations.

3. There’s an opportunity for succession planning

Studies show that between 40-60% of small and medium-sized business have no succession plan in place. Business life insurance can help you to fund your transition plan if you want to sell, liquidate or pass on your business. You can also use the cash value of the policy to help supplement your retirement income. Or if you pass away, your life insurance policy could provide a partner with the means to buy your shares and ensure funds are available for your family to cover expenses such as estate settlement and capital gain taxes.

Investing in business life insurance

At first glance, business life insurance has an obvious benefit—to help keep your business running and your loved one safe should the unexpected happen. But if you set up your policy correctly, business life insurance can benefit you in many more ways. If you’re interested in learning more about business life insurance, feel free to contact our team at BenefitDeck. Together, we can look at your goals and unique circumstances to find a policy that will work best for you.